Expat Tax USA

Happy New Year

The office will be closed Feb. 12-16 in observance of the Chinese Lunar New Year.

What Should I Be Doing While I Wait For My Tax Papers to Arrive? 

 1. Collect your details for your FBAR (click here for more details) reporting.  Your Dec or Jan statements will have your interest, but you need to go back and review your statements to find the high balances.  If you are a PR of Singapore, you also will need to report your interest and the high balance on your CPF accounts.  See below for more information on this form.  Ignored for decades, the IRS seems quite serious about it now.   Do a Google search for information dated 2008 and later.  An informative article can be found in the June-July 2008 edition of the Journal of Tax Practice & Procedure. You can also find good information in a publication put together by OffShore Press. (Google it).   Please note that the form was further modified in October 2008, so for the most up to date information you'll have to refine your search even further. (Then you'll need to refer to the IRS website to get the revised definition of US Person.)  Isn't this fun?

2. Secure an appointment early and make gathering your documentation a priority in order to meet your deadlines and avoid paying penalties and interest.

There is a general misconception about the Foreign Earned Income and Housing Exclusions.  You must file your 1040 and report the income to exclude it.  If the IRS notices you first you can lose the ability to exclude.

US Taxes are due in four quarters as you earn the money.  Don't make the mistake of not making estimated payments.  For income earned Jan-March 2010, the payment is due April 15th, 2010.

Singapore has very low tax rates.  If you earn over the exclusion you will likely still have a US tax obligation even with foreign tax credits.  Other countries in the region have higher taxes so you expect to owe little US tax if you are working in Australia or China, for example.  (Hong Kong & Macau have low rates.)

These are gross generalizations of course.

Offshore Settlement Offer:  This program is over, but voluntary disclosure (turning yourself in) is always an option.  If you have never filed a return, or have substantial unreporting on previously filed returns or have undisclosed foreign accounts (bank or investments) we will provide a referral to a tax attorney.

Hiring the Right Person 

The United States tax code, specifically its treatment of foreign-earned income, is complex and confounding to the untrained tax preparer.  You need a tax preparer conversant with the current tax code and trends that specifically effect , American citizens living abroad, permanent residents of the U.S.,  U.S. military stationed abroad, and others with U.S.-connected income.   

You could be overpaying or underpaying your taxes if you aren't careful.  If you are a first-time overseas filer, this is especially true as there are many special time tests and first year elections that will effect your future tax filings. 

Don't let your accountant from home guess his way through your taxes.  Hire a preparer with expertise in these types of returns.  If you aren't sure, ask your previous tax preparer  if they have experience with forms 2555 and 1116.  If they say no, you should not pay them to prepare your taxes.  It just makes the most sense to have an expat tax preparer prepare your expat taxes.  If you typically self-file, ask yourself if you are willing to devote the time to learn. 

Let s take the guess work out of your tax returns. 

A quick word about penalties:

The failure to file penalty is the harshest and you risk criminal action and denial of the ability to take the exclusions.

File even if you can't pay.

The failure to pay penalty isn't as bad but you should be aware that if you owe more than $50,000 the IRS can and likley will seize your assets in the U.S.

The interest rates that the IRS charges you for unpaid balances varies each quarter.  It has been set at 4% for the past 3 quarters.  If you amend a return and are due a refund, the IRS will pay this interest on your refund.  If you owe them, the interest also accrues on the penalties.

Hightlights of Our Services:

• Tax Returns and Notice Response 
• Estimated tax payments (1040-ES)
• Assistance with all types of Extensions 
• 1040/1040NR and all associated forms
• Most State Filings (For State Forms follow the link)
• Tax issues for LPRs (green card holders) and NRAs
• Expatriation Returns 
• Consultation on US tax implications and reporting requirements when establishing a small business in Singapore  (In association with Kim Johnson, CPA (California) KRJ Business Solutions, based in Singapore.) 
• Assistance with FBAR filings
• Basic Retirement Tax Planning.

Downloads:

2009 Checklist for New Clients

2009 Checklist for Returning Clients 

2010 Engagement Letter

Tax Guide for the Singapore Expatriate

Fast Facts Singapore Tax

Page 2 Fast Facts

Indonesian Tax Information

As the taxpayer you are responsible for the contents of your filed return.  Before you sign your return you should be able to review it with your tax preparer.  If they are unwilling to do so, you should take your work elsewhere.  Pay attention to the details.  For example, Schedule B has a yes/no block asking if you have foreign bank accounts.  Be sure you have answered this question appropriately. It is your responsibility even if your returns are prepared by a third party.

There are new preparer penalities and disclosures required by the IRS.  For this reason, you may be asked to provide more substantiation of your information and to sign more documents at the beginning of your engagement.  Please be sure to keep accurate records for seven years in the event you are called upon to furnish the source documents.  This includes all your bank statements from your foreign banks.

Important Links:

The Internation Revenue Service's website provides valuable information to all taxpayers.  Of particular interest to international filers is the International Tax Gap Series at www.irs.gov.

Military Filers should review the IRS website for important information, including information on free filing assistance.